Destination Maternity hires adviser as sales slump
- Apparel retailer Destination Maternity has hired consulting and advisory firm Berkeley Research Group to help “assess its options in the troubled retail environment,” according to a report in The Wall Street Journal that cited unnamed sources familiar with the matter.
- A spokesperson for the retailer confirmed it had hired BRG and told Retail Dive that the consultant “was not hired to explore any in-court or out-of-court restructuring or any strategic alternatives, they are focused on optimizing the expense structure.” Sources told the Journal that cost-cutting efforts could include re-evaluating its real estate portfolio, store-cost structures and remodeling, among other options.
- Department store closures have hurt the maternity retailer. In its most recent annual report, the company said Macy’s has closed 59 locations where Destination Maternity had leased a department. In 2016, the retailer ended leasing relationships with Gordmans, which filed for bankruptcy in March, and Sears, which has faced well-publicized financial troubles. The company also stopped producing a line of apparel exclusive to Kohl’s after that retailer decided to phase it out.
Destination Maternity looks like a lot of other apparel retailers this summer: struggling, but with hints of stabilization.
Both total sales and comparable store sales have declined at Destination Maternity in recent years. From fiscal 2015 to 2016, top-line sales fell from $498.8 million to $433.7 million. They company hasn’t posted a profit since fiscal 2013, and last year the retailer racked up a loss of $2.39 a share. For 2016, the company reported total debt of $43 million and annual interest expenses of $3.6 million.
In July, Destination Maternity announced that a merger deal with French retail and design company Orchestra-Prémaman had been terminated because of “challenges of satisfying applicable securities regulations in France and in the U.S,” including the French company’s absence from public stock exchanges in the U.S.
All that said, the company has managed to improve the trajectory of its comparable sales (which are still negative) during this year’s second quarter, and its e-commerce sales rose 30.2% in the second quarter.
With many malls seeing declining foot traffic and exiting anchors, retailers like Destination Maternity are being forced to re-engineer their store footprints and overall cost structures and strategies. If they can’t do it quickly enough or carry steep debt loads, retailers can face a crisis. (Children’s apparel retailer Gymboree, for example, had more than $1 billion in total debt, and made just over that amount in annual revenue, before declaring bankruptcy this summer.)
The industry is watching closely to see which retailer might be the next to file, as bankruptcies hit recession-era levels this year. But retailers are working to change the media narrative around the industry this year.
Retailers’ main trade association, the National Retail Federation, has been pushing back on the “retail apocalypse” theme. In a conference call this week, Mark Mathews, NRF vice president of research development and industry analysis, said that “the sense that retail is dying is just something we don’t see in the data.”
Mathews pointed mainly to how the Bureau of Labor counts retail employees, which typically excludes e-commerce jobs. He also pointed to recently built malls (that compete with struggling malls), store openings and the strong presence of traditional retailers in e-commerce sales as evidence against common assumptions about the industry in the financial and business media.
- The Wall Street Journal Destination Maternity Hires Adviser Amid Retail Turmoil
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